Altitude Scaffolding Ltd, Re Companies Act 1985

Factual and Procedural Background

This judgment addresses two separate applications raising the same legal issue concerning the validity of a creditors' meeting under section 425 of the Companies Act 1985. The first application relates to Company A, a subsidiary of Company B, proposing a scheme of arrangement with creditors divided into two classes based on insurance coverage for asbestos-related claims. Some subsidiary companies had meetings with no creditor attendance, leading to their exclusion from the scheme, while Company A had one creditor attend each meeting.

The second application involves Company C and associated companies, whose administrators seek directions on whether a meeting of creditors with potentially only one attendee would constitute a valid meeting for purposes of sanctioning a scheme regarding employers' liability asbestos claims. The court combined the hearings of both applications to consider the common legal issue.

Legal Issues Presented

1. Whether the attendance in person or by proxy of only one member of a class of creditors at a meeting convened under section 425 of the Companies Act 1985 constitutes a valid meeting of that class for the purposes of sanctioning a scheme of arrangement.

Arguments of the Parties

Appellant's Arguments (Company A)

• The term "meeting" in section 425 can, in one situation, mean a meeting constituted by a single person, and this meaning should apply universally.
• The court’s discretion in sanctioning the scheme allows consideration of whether the class was fairly represented, even if only one person attended.
• Section 425 does not impose a quorum requirement, supporting the view that a single attendee can constitute a meeting.
• Reference was made to the structure of section 425 and precedent allowing court discretion in assessing representation at meetings.

Appellee's Arguments (Company C)

• The word "meeting" should be construed in light of its purpose: to obtain and record the formal assent of the class.
• Reliance on precedent where a single shareholder’s formal written consent was treated as equivalent to a meeting resolution.
• A meeting convened on proper notice, attended by only one member, still constitutes a valid meeting if all others had the opportunity to attend and the resolution was put to a vote as scheduled.
• Noted that many section 425 meetings have low attendance, with votes often cast by proxy without discretion, limiting actual debate.

Table of Precedents Cited

Court's Reasoning and Analysis

The court examined the statutory requirement under section 425 that a "meeting" must be summoned and held for approval of a scheme of arrangement. The ordinary legal meaning of "meeting" requires the coming together of two or more persons. This has been firmly established since at least 1876 and consistently applied in company law contexts.

Exceptions to this ordinary meaning exist only where a class comprises a single member, allowing a single-person meeting to be treated as valid, as confirmed by authorities such as East v Bennett Brothers Ltd and In re RMCA Reinsurance Ltd. However, no evidence indicated that any class in these cases comprised only one creditor; thus, the exception did not apply.

The court rejected submissions that the word "meeting" should universally include a single attendee or that the court's discretion could replace the statutory requirement. The legislative history and related statutory provisions show that where a single-person meeting is to be deemed valid, this is expressly provided for, such as in section 371 of the Companies Act and insolvency rules.

The purpose of requiring a meeting is to enable members or creditors to consult and debate the scheme, and the fact that many meetings are attended by few and dominated by proxy votes does not justify altering the ordinary meaning of "meeting." The court also noted that technological means could satisfy the requirement of coming together.

Therefore, the court concluded that the presence of only one creditor does not constitute a meeting under section 425, and the court has no jurisdiction to sanction the scheme in those circumstances.

Holding and Implications

The court's final decision is to refuse the sanction of the scheme in the case where only one creditor attended the meeting and to deny the direction sought that a single creditor's attendance constitutes a meeting.

This decision means that the scheme cannot be sanctioned for companies where the creditor classes did not meet the statutory requirement of a meeting involving two or more persons. No broader legal precedent was established beyond affirming the ordinary legal meaning of "meeting" under section 425 and the limited scope of exceptions.